Filing Your Taxes Late

The federal tax filing deadline for individuals has been extended to May 17, 2021. Quarterly estimated tax payments are still due on April 15, 2021. For additional questions and the latest information on the tax deadline change, visit our "IRS Announced Federal Tax Filing and Payment Deadline Extension" blog post.

For information on the third coronavirus relief package, please visit our "American Rescue Plan: What Does it Mean for You and a Third Stimulus Check" blog post.

The federal tax return filing deadline for tax year 2020 is May 17, 2021:

If you miss the deadline and do not file for an extension, it's very important to file your taxes as soon as possible. Filing with TurboTax is fast, easy and guaranteed to get you the biggest refund you deserve.

Why file for an extension?
Filing an extension automatically pushes back the tax filing deadline and protects you from possible penalties. Late-filing penalties can mount up at a rate of 5% of the amount due with your return for each month that you're late.For example, if you owe $2,500 and are three months late, the late-filing penalty would be $375. ($2,500 x 0.05) x 3 = $375
If you're more than 60 days late, the minimum penalty is $100 or 100% of the tax due with the return, whichever is less.
Filing for the extension wipes out the penalty.
TurboTax Easy Extension is a fast and easy way to file your extension, right from your computer.

How long is my extension good for?
If you filed an extension by May 17, 2021 (2020 tax year deadline), it extends your filing deadline to October 15, 2021.An extension of time to file your return does not mean an extension of time to pay your taxes.
If you expect to owe money, you're required to estimate the amount due and pay it with your Form 4868. As long as you do that, the extension will be granted automatically.

What if I didn't ask for an extension?
The consequences differ depending on whether you owe the IRS money or the IRS owes you a refund.If you are getting a refund:
This is one of the great little secrets about the federal tax law. If you have a refund coming from the IRS—as about three out of four taxpayers do every year—then there is no penalty for failing to file your tax return by the deadline, even if you don't ask for an extension. However, this might not be the case for state taxes.That's not to say there aren't very good reasons for filing on time. Even if you have a refund coming, consider the following:You can't get your money back until you file, so you should file as soon as you can to get your money as soon as possible.
The statute of limitations for the IRS to audit your return won't start until you actually file your return. So, the sooner you file, the sooner the clock starts ticking.
Some tax elections must be made by the due date, even if you have a refund coming. This applies to a very tiny percentage of taxpayers.
If you have a balance due:
If you haven't paid all of the tax you owe by the filing deadline:You'll likely end up owing a late payment penalty of 0.5% per month, or fraction thereof, until the tax is paid.
The maximum late payment penalty is 25% of the amount due.
You'll also likely owe interest on whatever amount you didn't pay by the filing deadline.
If you didn't get an extension,You are also looking at a late filing penalty of 5% of the unpaid tax per month, plus interest.
The maximum late filing penalty is 25% of the amount due.
Beware: No statute of limitations
Regardless of whether you are due a refund or owe, there is another point to keep in mind: If you never file your return, there is no limit on how many years the IRS can go back to assess and collect tax.

What if I owe the IRS but can't pay?
If you find yourself in this situation, you have a few options available, such as:credit card payments
installment agreements
"offers in compromise"
You can also simply file your return and wait for the IRS to bill you, but don't be surprised if the bill includes interest and penalties.

Can I pay my tax by credit card?
Yes, you can pay your tax bill with credit in a variety of ways. Credit card and bank loans are both payment options. You can apply for a bank loan, home equity loan or take a cash advance on a credit card to pay your tax bill.Third party providers like Official Payments Corporation are also available to facilitate using a credit card to pay your tax bill.These companies charge a convenience fee (around 2.5% of the amount being paid) for their service.
That fee is in addition to any interest and finance charges your credit card company may charge you.

Can I pay my tax in installments over time?
If you find yourself owing more than you can afford, you should still file a return.Even if you don't enclose a check for the balance due, sending in your return protects you from the late-filing penalty that otherwise would keep digging you deeper into a hole.
Attach a Form 9465 Installment Agreement Request to your tax return asking the IRS to set up a monthly payment plan to pay off what you owe.
About 2.5 million taxpayers are paying off their bills under such an arrangement and recently the IRS made it easier to qualify. In the past, before the IRS would okay an installment plan, the agency demanded a look at your finances—your assets, liabilities, cash flow and so on—so it could decide how much you could afford to pay.That's no longer required in cases where the amount owed is under $10,000 and the proposed payment plan doesn't stretch over more than three years.
You can also now apply online for the installment agreement. More details are available on the IRS website
Don't think the IRS is a patsy, though. You may be better off if you can borrow the money to pay your bill, rather than go on an installment plan which means, effectively, borrowing from the IRS.The IRS charges a $52 fee to set up an installment payment plan for direct debit; $105 for non-direct debit agreements. (For eligible low-income individuals, the fee is $43.)
The IRS interest rate on late payments was 3% for the fourth quarter of 2020 and can change quarterly.
There's also a late-payment penalty of 1/4 of 1% a month. The 3% 2020 interest rate plus 1/4 of 1% a month adds up to the equivalent of 6% a year.

Does the IRS ever negotiate the amount owed?
Under certain circumstances, the IRS is authorized to resolve a tax liability by accepting less than full payment. An "offer in compromise" is an agreement between a taxpayer and the IRS that settles the taxpayer's tax debt. There are three circumstances under which the IRS is authorized to compromise:When there is doubt that the tax is correct.
When there is doubt that you could ever pay the tax in full.
When the tax is correct and you could pay it, but payment would result in an exceptional circumstance, economic hardship, or be unfair and inequitable.
Form 656: Offer in Compromise Package should be completed to file an Offer in Compromise with the IRS. Included with the Form 656 package are Form 433-A, Collection Information Statement for Wage Earners & Self-Employed Individuals and Form 433-B, Collection Information Statement for Businesses.You may need to complete the appropriate Form 433 and should be prepared to provide other documentation and explanations as they are requested.
Various options are available for accepted Offers in Compromise requests, such as a reduced total payment and scheduled monthly payments.
Defaulting on an accepted offer in compromise can result in the IRS filing suit against you and reinstatement of the original tax debt, plus interest and penalties.

Can I get an extension of time to pay my tax?
An extension of time for payment of tax can be filed with the IRS on Form 1127: Application for Extension of Time for Payment of Tax, but the legal requirements are strict:Form 1127 must be received by the IRS on or before the date that the tax is due.
You must provide a complete statement of all your assets and liabilities at the end of the last month, and an itemized list of money you received and spent for the three months immediately prior to sending in the extension to pay request.
You must demonstrate that paying the tax when due would result in undue hardship; simple inconvenience is not enough of a hardship to qualify.
You need to show that paying the tax when due would result in a substantial financial loss and that you don't have the cash, or can't raise the money, by selling property or through borrowing.
When approved, extensions to pay are generally limited to six months. Plus, the IRS requires some acceptable form of security before granting an extension of time to pay. The security may be in the form of a bond, notice of lien, mortgage or other means, depending upon individual circumstances.For more tax tips in 5 minutes or less, subscribe to the Turbo Tips podcast on Apple Podcasts, Spotify and iHeartRadio Brought to you by TurboTax.com

Source: Read Full Article

Previous post Nine clever cleaning hacks for a sparkling clean grill
Next post Dominic West’s Wife Catherine: We're 'Totally Devoted' After Lily James Drama